Differentiation of primary mouse keratinocytes in vitro requires an increase in both cytosolic free Ca2+ and endoplastic reticulum bound Ca2+. Inhibitors of protein kinase C prevent Ca2+-induced keratinocyte maturation while PKC activators accelerate terminal differentiation; thus one or more of five isoforms of protein kinase C (alpha, delta, epsilon, eta, zeta) are potential mediators of keratinocyte differentiation. Transfection of highly stable PKCalpha antisense oligonucleotides into primary mouse keratinocytes reduces PKCalpha protein selectively, inhibits PKCalpha kinase activity during Ca2+-induced differentiation, and inhibits induction of the late differentiation markers loricrin, filaggrin, spr-1 and transglutaminase, supporting a role for PKCalpha activation in keratinocyte gene expression. PKCdelta, but not other PKC isoforms, is tyrosine phosphorylated in differentiating cultured mouse keratinocytes and in mouse epidermis. PKCdelta tyrosine phosphorylation requires a functioning EGFR. The EGFR is activated during keratinocyte differentiation as demonstrated by increased cell-associated TGF-alpha, and by tyrosine phosphorylation of SHC in differentiating keratinocytes. In keratinocytes, AP-1 dependent gene expression is modulated by the relative activity of individual members of the Fos family, and selective upregulation of Fra-2 (inhibitory) or c-Fos (activating) is controlled by PKC isoforms. The interaction of the two PKC dependent transcriptional regulatory families AP-1 and CREB is likely to mediate the expression of keratinocyte-specific genes. Skin from mice harboring a targeted disruption of the EGFR was grafted to nude mice and displayed wavy, flattened hair fibers with irregular width and cuticular abnormalities. A marked inflammatory infiltrate engulfed the hair follicles of most EGFR-/- grafts at the time wildtype control grafts were entering catagen. EGFR may be required to protect the regressing hair follicle from inflammatory or immune reactions at the time of follicle remodeling in the catagen phase. Cell lines have been established from isolated hair follicle buds or keratinocytes that display lineage specificity when combined with specific dermal cells in vivo. A predetermined cell lineage exists for hair follicle matrix, sebaceous gland and epidermal precursors, and such cells could be used as donors for reconstituting intact skin with genetically modified multi-potential precursor cells.